Tag Archive: digital

  1. Should Google be worried about Amazon?

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    It’s no secret that Amazon is no longer ‘just’ the world’s biggest retailer. Its ‘other’ business – digital advertising – is having a seismic impact on the advertising industry, so much so that is now a threat to the traditional digital advertising duopoly, Facebook and Google. This week, eMarketer released a report claiming that Amazon is ‘chipping away’ at the very core of Google’s business – search.

    Amazon is increasing its share of US digital ad spend

    Amazon’s star has been on the ascendant for a significant period of time, but 2019 has truly been a stellar year. Revenue for its ad business climbed by 37% to $3 billion in the second quarter of 2019, while back in February eMarketer predicted that Amazon would claim 8.8% of US digital adspend this year, up from 6.8% in 2018. This is impressive in itself, but even more so when you consider that Google’s share was predicted to drop to 37.2%, down from 38.2% in 2018, while Facebook would only increase theirs by 0.3%.

    Google’s near-monopoly of search is set to decrease

    This was the backdrop for the latest eMarketer report about Amazon’s search share. The US search market is set to grow by 17% this year, to a huge $55.17 billion. While Google still of course owns the lion’s share of the market, with 73.1% ($40.3bn), eMarketer anticipates that that will fall to 70.5% by 2021. Amazon, on the other hand, is expected to have grown its share of the market to 12.9% by the end of 2019, and to 15.9% in 2021. Microsoft has now been relegated to third place in the search market, with a 6.5% share.

    What’s behind Amazon’s success in the space?

    So what is behind Amazon’s increasing prominence in digital advertising? The key reason is its understanding of consumers’ purchasing behaviours. It has a treasure trove of data about buying habits which is of course very valuable for advertisers, as they can reach customers right at the time that they intend to make a purchase. Amazon’s data even allows advertisers to understand when a buyer might want to repurchase a product, so that they can be targeted at the right time, with less wastage.

    Consumers’ research behaviour is changing as well: they now increasingly use Amazon as a research resource rather than just a purchasing platform, and use broader search terms such as ‘gift’ or ‘makeup’, offering ample opportunities for brands to reach them. And it’s not just brands that sell directly on Amazon that can benefit; advertisers that sell products and services that can’t be bought on Amazon, such as cars or insurance, can use the retailer’s extensive customer data to understand who might be interested in buying their products. Finally, Amazon has very high conversion rates, particularly for products sold on their platform: 20-30%, versus 1-10% on Facebook, for example, where ads are seen as more intrusive and trust is an issue.

    Harnessing its advantages

    Amazon has wasted no time in harnessing these advantages over its competitors. Last year, it simplified the branding for its advertising products, creating Amazon Advertising. This includes sponsored ads which work in a similar way to Google search, allowing advertisers to bid for search terms, with the highest bidders more likely to appear in ad listings. Display ads are available programmatically for both Amazon and third-party sites using the Amazon DSP, which allows advertisers to see easily how well their media spend translates into sales.

    In 2018, Amazon acquired Sizmek’s adserving and dynamic creative units; the dynamic creative allows for more tailored ads which incorporate data such as location or shopper behaviour, while the ad server side helps advertisers to place ads and measure effectiveness, helping Amazon to better compete with Google. Overall, these acquisitions have helped Amazon improve the functionality that had been lacking in comparison to its two major competitors in the digital advertising space.

    An unexpected benefit for both Google and Amazon

    While Google will no doubt be alarmed that Amazon is encroaching on its search dominance, there is something of a silver lining. Both organisations are being examined by regulators at the Department of Justice and the Federal Trade Commission – Google because of its search stranglehold and Amazon for using its e-commerce marketplace to promote its own brands over those of rivals. While these investigations continue, it won’t hurt either of them to have increased perception of competition.

    An increasingly important player

    As Amazon increases its functionality and collects and organises evermore customer data, it will become an increasingly important player in the digital advertising sector and undoubtedly an ever more worthy recipient of valuable ad dollars. Advertisers – even those that don’t sell via the platform itself – should seriously consider Amazon’s advertising solutions for three reasons: lower pricing thanks to increased competition in the search space; remarkable conversion rates; and Amazon’s wealth of rich data from its sales funnel.

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  2. Is Netflix ready for the launch of rival platforms?

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    Make or break for Netflix

    A couple of weeks ago, Bank of America Merrill Lynch told clients that Netflix’s Q3 figures, out later today, would be ‘make or break’ for the streaming platform, and would indicate whether it would be able to effectively compete with new rival platforms from the likes of Disney and Apple. It’s been a difficult few months for Netflix – its share value has plummeted by nearly 30% in the last three months, and subscriber levels fell short of the company’s own guidance in Q2. Whether those subscriber levels have recovered will be of particular interest in the Q3 results – and investors will be looking for signals that they can retain that recovery as competitors launch their streaming platforms.

    Who are the competition?

    So what does the competition look like for Netflix? Apple and Disney are launching their streaming services next month: Apple TV+ on 1st November, and Disney Plus on 12th November in the US, Canada and the Netherlands, with other markets in the months afterwards. This makes strategic sense, particularly for Disney, as it can piggyback on the marketing for its big-budget holiday-season films, and Netflix has shown over the last few years that it gets its biggest viewership in the last couple of months of the year. WarnerMedia’s HBO Max and NBCUniversal’s streaming service will be launching in early 2020. So Netflix’s battle to keep its subscribers loyal – and grow its customer base – starts now. Convergence Research Group, which tracks the streaming industry, predicts that its 47% share of the streaming market in 2018 will decrease to 34% by 2022, as reported in an LA Times article.

    Original content will be increasingly important

    This decrease will in part be down to the fact that Netflix will be losing some of its most watched shows to its competitors: ‘Friends’, for example, will go to WarnerMedia’s streaming service in early 2020, while ‘The Office’ will be shown by NBCUniversal from January 2021. With adults spending only around 30% of the time they spend with Netflix watching Netflix Original content, it looks like this could have an effect on Netflix’s subscriber numbers.

    However, Bank of America Merrill Lynch told investors that he believes Netflix will have time to ramp up production of original content while its rivals work on building their subscriber bases. This will means that Netflix will need to continue its huge investment into original content – this year it is estimated to have spent around $16 billion dollars, and Pivotal Research Group estimates that this will have climbed to a giant $35 billion by 2025. This needs to be funded from somewhere and Netflix’s capacity to raise subscription fees – its fallback option to date – will be stymied by increased competition. Netflix could also consider increasing its debt, introducing ads, investing in innovation (such as the ‘Bandersnatch’ episode of ‘Black Mirror’, where viewers could choose what the main character did next), or harnessing the vast wealth of data they have on what people like to watch, and where.

    A core part of the streaming bundle?

    Netflix’s choppy year has made investors a little nervous, which is why so much rests on the figures that it is releasing today. But many think that things will be ok. Mark Mahaney, lead internet analyst at RBC Capital Markets, for example, told CNBC that most people will want to use more than one streaming service, and it’s likely that that will mean Netflix plus another – Netflix will be a core part of the bundle. He believes that Netflix has the scale advantage and better brand name, content, global distribution and partnerships than its competitors, which bodes well for the future. Time will tell!

    What does this mean for advertisers?

    TV is still a crucial medium for advertisers, but with viewers having more and more ad-free options from the new streaming platforms, it will become increasingly difficult to reach their hearts and minds. What’s more, they are likely to be less forgiving of higher ad loads on the ad-funded free-to-view channels. This means that the most effective media channels will likely become more expensive, and the wise ones may well have fewer, higher impact ad spots for which advertisers will pay a premium. Furthermore, the growth of addressable TV will allow for more targeted and therefore more engaging ads, and lower levels of rejection by the consumer.

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  3. What happened at WeWork?

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    WeWork has been lauded by many as one of the huge success stories of the 21st century. Before they came along, renting office space was run-of-the-mill, boring. You paid money, you got a room and installed some desks, some chairs, a printer. You moved in. That was it.

    Not just an office space

    WeWork, however, wants you to believe that you aren’t simply paying for space. Of course, you get a beautiful new office, but you are also paying to be a part of something new, part of a community of like-minded people. Indeed, part of WeWork’s mission is that it is “a place you join as an individual, ‘me’, but where you become part of a greater ‘we’.” WeWork positions itself amongst those big disruptors of this century – Netflix, Uber, even Facebook, and an IPO was a natural next step for this real estate/tech behemoth.

    A failed IPO

    Dreaming of a huge $47 billion valuation, the cash-hungry We Company, WeWork’s parent company, aimed to sell enough shares to raise $4 billion and had, according to the New York Times, ‘lined up a $6 billion bank loan that was contingent on the IPO’.  By the end of September, though, those heady days were over. WeWork discovered that investors were sceptical about their huge valuation, large amounts of debt and corporate governance issues. They pulled the IPO, Founder-CEO Adam Neumann was forced to step down, are looking at redundancies and are reconsidering their expansion strategy into China.

    Positioned as a tech firm

    So how did WeWork value itself so high? What was it doing right? A lot of it came down to brilliant brand-building and marketing. As touched on earlier in this piece and explored by Mark Ritson in this article, WeWork didn’t position itself as a real estate or office rental firm. It wanted to be seen as a tech firm, or, as Ritson says, there was a “vague, socially-constructed idea that this is another big disruptive tech firm with another massive IPO.” 21st century tech firms have of course seen phenomenal success over the past two decades, and many have an aura of community and purpose to humanise the vast profit they turn over. WeWork, with its mission to ‘Create a world where people work to make a life, not just a living” embodies that tech ethos, and as such pushes its community app. This wasn’t just a forward-thinking branding decision: if it worked, it was a sage financial decision, with tech companies raking in revenues far higher than those of more traditional businesses.

    Shaky foundations

    From the outside, this approach seemed to be working for WeWork: in the first half of 2019, for example, it earned $1.5 billion in revenue. However, the gloss loses its sheen a little when you discover that in the same period it lost almost $900m. And the sheen disappears completely in the context of information that it was looking to raise between $3 billion and $4 billion in debt to tide it over.

    A future in debt

    And that’s the key to this story: the losses and associated debt. While investors don’t necessarily insist that start-ups are profitable before they go public, it helps to be able to show a path to profitability. We Company’s revenue and operating losses are moving in tandem, rather than showing an increasing gap. They may find some cold comfort in the fact that they aren’t alone in this plight: ‘fellow’ disruptors Netflix and Uber, to name just two, show no sign of becoming profitable in the near or even mid-future. Netflix must continue its huge investment ($15 billion this year) into original content in order to survive stiff forthcoming competition in the shape of Disney, Amazon and Apple. To finance that, Netflix is estimated to have a debt of around $12 billion – and with a net income of just a twelfth of that, it seems unlikely that it will ever be able to pay that off.

    What does this all mean?

    Is WeWork’s failed IPO the first sign of a difficult, uncertain future for the big disruptive organisations of the last 10 years? Perhaps the tech disruptors of the future will bring the focus back to business strategy and creating revenue streams. Brand positioning and purpose are of course crucial to a business’ success, but they must be founded in a robust business and financial strategy to guarantee success.

    Disclosure: ECI Media Management’s UK office is a tenant of WeWork in London

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  4. The growth of Sky’s AdSmart: the saviour of TV?

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    TV’s struggle to retain its dominance

    TV has long reigned supreme in the advertising world, but in recent years it has started struggling to hold onto its throne. Consumers are turning away from live TV – Britons, for example, watch five hours of video content a day, but only three of those are live TV. They are being lured away by the on-demand streaming services such as Netflix and its competitors. Part of the allure of the streaming services is their lack of ads: tolerance for irrelevant, interruptive ads has decreased dramatically, which TV has historically been unable to respond to due to its lack of addressability. This is one of the factors that has made Google and Facebook so successful – their ad services offer greater targeting and buying flexibility, an attractive proposition for brands seeking to reach their audiences with highly engaging, relevant advertising.

    Is addressability the answer?

    But TV is fighting back. In 2014, Sky launched AdSmart, its addressable TV advertising service. It tailors ad breaks based on the viewer’s profile and location: this enables advertisers to better target their campaigns and improves the effectiveness of TV advertising. Furthermore, due to an ad only playing when the specified audience is watching, it ensures advertisers’ money is spent efficiently. This is a crucial modernisation of the TV format which means that it can better compete with its digital rivals. Critically, it can be used across both linear and on-demand TV, and to target niche or region-specific audiences – particularly relevant for smaller or regional brands.

    Clear benefits

    Sky’s ‘AdSmart: Five Years and Forward’ study, published in August, found that addressable TV can increase ad engagement by 35% and cut channel switching by 48%; what’s more, viewers of addressable TV ads are 10% more likely to spontaneously recall an ad compared to linear TV advertising. This has clear benefits for advertisers – especially as TV doesn’t suffer from the brand safety issues that have plagued the likes of YouTube over the years. By mid-September 2019, AdSmart has delivered 17,000 campaigns for more than 1,800 advertisers.

    Increasing reach

    Three years after it launched AdSmart in 2014, Sky began its pan-European roll-out into Germany, Italy and Austria. Significantly, in 2019 two important UK players and competitors of Sky’s – Virgin Media and Channel 4 – confirmed that they would be joining the AdSmart platform. Virgin Media went live on the platform in early July; Sky Media will act as ad sales agents while Virgin Media will use both AdSmart and tech developed by its parent company Liberty Global. Virgin Media will also be trialling AdSmart on Virgin Media One in Ireland towards the end of 2019. This month, Sky announced that Channel 4 would be joining the platform in a deal that includes Channel 4’s own channels as well as broadcasters for which it handles advertising sales, including UKTV and BT Sport.

    AdSmart’s roll-out across Europe as well as its partnerships with key players in the UK gives international advertisers the ability to target and reach consumers in key western advertising markets, and the uptake of addressable TV will surely only grow over time.

    ECI’s view: great for clients new to TV, but not ideal for those looking for mass reach

    AdSmart is a great tool for clients who are new to TV advertising or who have a niche/hyper-targeted audience or regional demographics they want to deliver a message to at potentially a fraction of the cost of traditional TV campaigns.  It allows TV to have an addressable function, driving impactful messages to the correct consumer 100% of the time. It is a union of the brand building ability of TV with the precise targeting capabilities of digital.

    However, this is not a silver bullet. The extra cost of addressable ads often outweighs the targeting gain, meaning that every contact in the target group is more expensive – and you’re not benefitting from the overspill of traditional TV activity, reaching unintended consumers, as AdSmart treats the TV screen as a solely digital platform. Additionally, AdSmart activity is not independently reported through industry bodies such as Barb: reported outputs come from NBCU’s CFlight, an internal tool developed by NBCU. Finally, AdSmart ads cannot be dropped into live programming – spots during major events such as live sports must be purchased in the traditional way.

    Addressable TV is an exciting development and gives TV a more level playing field when competing with digital, but it’s not right for all brands all the time, particularly those who seek mass reach.

    AdSmart is just one of the media developments impacting on inflation that we examine in our Inflation Report Update, released this week. You can read it here.

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  5. The ‘big six’ are adapting – is it working?

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    For so long, advertising’s ‘big six’ – WPP, Omnicom, Publicis, Dentsu, Interpublic and Havas – had things pretty easy. Clients relied on them for creativity, innovation, new technology, the lowest prices and so much more, and they only had one another as serious competition for the big accounts. Complacency became a real risk: growth was driven largely by acquisition, and they relied on scale and global reach being a barrier to entry for any ‘upstarts’.

    In-housing and management consultancies pose a risk

    Recently, however, things have become much more challenging. It started with the ongoing accusation that the big six were not transparent in their business practices, as explored in the ANA’s explosive K2 report in 2016. This concern prompted many clients to seriously consider, or even actively start, bringing their media buying activities in house, thus cutting out the middleman, saving money and eliminating transparency concerns. In-housing has gathered pace with the rise of digital advertising, with many major brands bringing functions such as creative, content creation and even programmatic buying in-house. And then of course, there’s the threat of the management consultancies, who, as E.J. Schultz writes in Ad Age, are ‘wooing chief marketing officers with their vast array of strategic and data analytics solutions to big business problems that traditional advertising can no longer solve’. In 2018, the marketing services units of Accenture, PwC, IBM and Deloitte muscled into Ad Age’s ranking of the 10 largest agency companies in the world, making the big six sit up and take notice once and for all.

    A resurgent advertising industry

    Most recently, the threat has come from a resurgent independent advertising industry. In a recent Campaign article, Iain Jacob wrote about how the industry appears to be ‘returning to a more natural state of creativity that has always defined the best advertising practitioners’ – he suggests that creativity has been stifled by the big six and the landscape had fallen flat. Now, start-ups in every sector of the industry, from content and digital creative to data and performance, backed by private investors, venture-capital funds and private equity, are flourishing. They are being fuelled by clients who are promoting diversity and supporting a ‘fundamentally different ecosystem to procure the creativity they need to thrive’.

    How have the big six reacted?

    In the manner of turning a large ship, the reaction of the big six has been somewhat slow, but is now gaining momentum. Each has been pursuing radically different strategies, compared both to their past strategies and to one another. WPP, for example, has – as we explored in more detail in this blog – focused on streamlining its structure, consolidating its workforce and investing in more data and technology alongside creativity. For them, it’s a question of simplifying their offering so it’s easier for clients to navigate. Jacob points out that WPP has taken a different approach to data to Publicis Groupe: the latter acquired data marketing business Epsilon, therefore cementing its status as a data ‘controller’, while WPP has sold its stake in Kantar to focus on being a smart data user or ‘processor’ to drive value for clients. Jacob makes it clear that his money is with WPP in this instance. In second quarter reports, Omnicom’s John Wren stressed the group’s commitment to creatives and creativity as the key driver of their recent growth: ‘Omnicom was founded by creatives. It is not something that can be acquired or sold’.

    Is it working?

    This year’s second quarter reports for the six holding companies were generally positive. WPP’s key sales measure – organic growth less pass-through costs – fell by 1.4%: not immediately promising, but a marked improvement on the 3% fall forecast by analysts, and also an improvement on a fall of 2.8% in the first quarter. Interpublic also enjoyed good news in July: a second quarter net revenue increase of 9.1% and organic net revenue increase of 3.0%. American conglomerate Omnicom reported a fall in revenue of 3.6%, but an increase of net income of 1.8%, thanks to organic growth in advertising and healthcare. Things weren’t so optimistic at Publicis: the French company reported lower-than-expected revenue for Q2 2019, with just 0.1% organic growth, compared to analysts’ expectations of 0.7%. That resulted in a slump in share value of 8.5% – their lowest level since 2012.

    In the short term, and considering the financial positions of the major players, the focus on creativity and client deliverables rather than acquisition of data companies seem to be playing well. In the context of the rise of in-housing by clients, is data acquisition the right thing to do? Only time will tell.

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  6. Are ads an inevitability for Netflix?

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    Netflix – a success story

    It’s fair to say that Netflix is one of the huge tech success stories of the 21stcentury. Having started as a DVD sales and rental business, it expanded its business in 2010 with the introduction of streaming media, whilst initially retaining the DVD side of the business. It now has more than 148 million subscribers in over 190 countries. Its earnings to date have reflected its meteoric rise: in Q1 of 2019, for example, the company reported $4.52bn revenue, compared to the $4.5bn anticipated by Wall Street.

    Competitors on the horizon

    So far, so good. However, Netflix has undoubtedly benefited from first-mover advantage, and that may be coming to an end. Many media companies such as Disney, Apple, Amazon, Sky and traditional broadcasters are launching their own streaming services with established and new content; Disney has already removed all its original movies from Netflix, as well as those it owns the rights to, including Marvel and Star Wars. In the aforementioned Q1 report, Netflix stated that it didn’t expect this new competition to negatively affect its subscriber growth; however, that seems inevitable, and Netflix has already taken steps to mitigate the risk.

    Taking the battle to competitors with original content

    The obvious solution to increased competition has been for Netflix to make substantial financial investment into the creation of its own original content, which can’t be withdrawn by a competitor. However, that’s a huge investment and, as CNN points out, ‘the continuous influx of revenue still falls several steps short of what the company is spending each quarter [on original content]’. The cost has to be covered somehow – but how?

    Running ads to cover costs

    In an IAB panel back in April, execs from YouTube, JPMorgan and two agencies concluded that running ads were an inevitability for Netflix – echoing Sir Martin Sorrell in 2015 when he said that Netflix would inevitably have to build digital ads into its marketing strategy. Hulu has done this successfully with a two-tier subscription option – a more expensive ad-free choice, and a cheaper ad-supported service. Analysts believe that Hulu makes more money per subscriber from its subscription plus ads combination than it does from its more expensive ad-free option. Given Netflix’s scale – it is the third most-watched TV ‘channel’ in the UK, for example – it is an extremely attractive proposition for advertisers – and that makes it attractive for investors and Wall Street. However, Netflix subscribers are vocal in their opposition to this suggestion, and a 2018 trial was not a success: 57% of a control group said they would cancel their subscription. It’s worth noting though that Hulu added more subscribers than Netflix in Q1 the US (3.8m versus 1.74m), even with ads.

    There are alternatives to ads

    What are the alternatives? Netflix could of course increase its subscription prices; even after bumping them up in the last quarter of 2017, it increased its subscriber count by 50% more than Wall Street predictions. There is probably an upper limit to this option though. Another would be to look at the other side of the balance sheet: cut investment in original content and focus on the shows that are sure to be smash hits, which aren’t necessarily original. In 2018, just two of the top ten most watched Netflix shows were Netflix originals.

    What does the future hold for Netflix?

    Netflix is comfortably winning the streaming game at the moment, but it needs to re-examine its model in light of the rise of competitors. A digital ad platform is one option, but there is a risk that that move would lead to the loss of many of its subscribers – which competitors would welcome with open arms. There are other options – increasing subscription prices and cutting costs elsewhere – and Netflix will have to look at all of them in depth in the coming months.

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  7. Conflict of interest means WPP won’t participate in Accenture-led pitches

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    Conflict of Interest means WPP won’t participate in Accenture-led pitches

    In a move unsurprising to many industry insiders, it emerged this week that WPP would henceforth refuse to participate in any Accenture-led audits or reviews. It cited as its reason that Accenture could use the data to which it has privileged access as an auditor to undercut WPP’s prices in other pitches for ad budgets.

    Accenture’s digital arm gives it an unfair advantage

    The concern is rooted in the fact that, last year, Accenture’s digital arm, Accenture Interactive, launched a programmatic services practice, offering programmatic consulting and in-housing; media strategy, planning and activation; and ad tech implementation and support. This placed them in direct competition with specialist programmatic companies but also the major media agencies, including WPP’s GroupM.

    WPP is arguing that, from Accenture’s privileged position, it will be able to offer advertisers cheaper, more effective media rates during pitches, giving it a massive and unfair advantage. Accenture maintains that there are internal barriers in place between its audit and programmatic buying business units, but WPP is evidently unconvinced – as are we.

    The threat from the ‘vanguard of advertising’

    This decision is not out of the blue: there has been growing disquiet amongst the more traditional media agencies who feel, according to an article in the New York Times, “threatened by the ‘vanguard of advertising today’ – consulting firms like Accenture which offer technical wizardry in an age of cord-cutting and ad-blocking.” The fact that Accenture will now potentially be able to take market share from these agencies in an ‘underhand’ way only serves to entrench the tension – the battle has become war.

    WPP needs to persuade clients to follow its lead

    The issue with WPP’s move is that it will need to persuade clients – both current and future – to not work with Accenture as well. That could be extremely difficult: when clients own their data (as opposed to their agency), it is often inextricably entwined with a number of parties, an arrangement that is difficult to move away from; a Digiday article points out that clients will judge whether it’s worth it based on how satisfied they are with their auditor, and not on any gripes the advertiser has with said auditor.

    ECI Media Management: independent and impartial

    At ECI Media Management we fully back WPP’s decision. Impartiality is at the heart of effective auditing and no company which offers media services to a market where it has highly privileged access to the data and financial information of both advertisers and agencies can claim to be impartial. As Paul Bansfair, the Director General of the IPA (the UK ad industry’s trade body) said when Accenture Interactive announced the launch of its programmatic buying branch, “In an era where transparency is under the spotlight, this self-evident conflict of interest is unacceptable.”

    At ECI Media Management, we are 100% director-owned and have no affiliations with any media agencies or owners, so our advice and actions are always based on what is best for the client. We believe that should be the norm across the auditing and media management sector.

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  8. Apple is retiring its iconic iTunes in a move reflective of a changing industry

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    Apple is retiring its iconic iTunes in a move reflective of a change in industry

    Back at the beginning of the millennium, the music industry was in a serious state. CDs were in decline as consumers digitised the way they consumed music: but they were doing it for free via Napster and other pirate websites.

    And then, in 2001, the industry’s knight in shining armour appeared, in the shape of Steve Jobs. He announced the birth of iTunes at the Macworld Expo, heralding a music revolution. The era of MP3 music was here, and over the next six years Apple would sell more than 100 million units of the iconic iPod with which to listen to those MP3s. Apple was at the pinnacle of its success, having redefined what music ownership looked like: no longer physical records, tapes or CDs, but a world of songs in your pocket.

    In the 18 years since its launch, iTunes has become a media behemoth, a one-stop shop for users to consume not just music, but movies and TV and, latterly, podcasts too. But over the last few years, downloading has been eclipsed by a new kind of access: digital streaming.

    A new contender in the market

    In 2008, just a year after the launch of the first iPhone and when iTunes was at the height of its powers, a small Swedish start-up called Spotify launched its music streaming service across eight European markets. Its two-tier model – free to the consumer ad-funded, and a premium subscription option – gave users on-demand access to stream millions of tracks. Music streaming was still in its infancy, accounting for just 1% of global music revenues in 2007, and Spotify’s initial growth was good but unremarkable. By 2013, they had 30 million active users and 8 million premium subscribers.

    It is the six years since 2013 that have seen a seismic shift in how music is consumed. By March of this year, Spotify’s user base had skyrocketed, with 217 million active users and 100 million premium subscribers around the world, a number which looks set to continue growing. By opening up the streaming market and persuading users to give up ownership of their music, Spotify has arguably redefined the music industry, just as Apple did when it persuaded users to give up physical ownership.

    The consolidation of Apple

    iTunes’ download model was starting to look clunky and old-fashioned. In 2015, Apple launched Apple Music, its streaming service which it hoped would compete with Spotify and other broadcasters with its three distinct components – on-demand streaming, radio and Apple Connect, which allows artists to upload songs, videos and photos for followers. Since then, as streaming has increasingly become the norm, there have been rumours that iTunes would be wound down.

    That finally came to pass this week, as Apple announced at its annual Worldwide Developers Conference in San Jose that it would replace iTunes with standalone music, television and podcast apps. This will align Apple’s media strategy across the board: iPhones and iPads already offer separate apps for Music, TV and Podcast, and Mac/Macbook users can expect the same.

    However, the move is symbolic as well as practical. As Amy X Wang says in Rolling Stone, “by portioning out its music, television and podcast offerings into three separate platforms, Apple will pointedly draw attention to itself as a multifaceted entertainment services provider, no longer as a hardware company that happens to sell entertainment through one of its many apps” – and that’s increasingly important as iPhone sales have started to slow.

    Consolidation moves reflecting the wider market

    This move towards entertainment services is being seen across the technology and communications sector: we’ve seen the tech giants buy up rights to live sport, while AT&T acquired Time Warner for $85bn and Disney bought most of the 21st Century Fox empire, fending off an offer from Comcast. This trend is of course being driven by changing consumer behaviour as internet connections over 4G and now 5G accelerate – allowing for uninterrupted streaming of music, TV and films. We’re seeing the effects of technology on the media and communications industries, and lines between these sectors will continue to blur. This blurring of boundaries will then pose another issue on how they can all be monitored & assessed both separately and in totality.

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